It was another losing quarter for the US Post Office -
$5.2bn for the quarter ending in June. How much longer can the struggling agency
last? Apparently not much longer as the postmaster indicated it was low on cash
and may not be able to borrow money if the US Congress did not help.
Lawmakers have stated they are committed to helping the USPS
but oddly enough as they expressed their commitment, they leave town for a
month long recess without reaching an agreement on postal legislation. In fact
they left the same week as the USPS defaulted on a required $5.5bn prepayment to
the federal government for future retiree health benefits. These prepayments have
accounted for about 80% of the USPS’ losses this fiscal year. In fact, the postmaster
has been constantly warning the US government that a default was imminent but
sadly it appears not many folks took notice – perhaps there is more concern
over getting reelected then getting actual work done is more important?
Still, the USPS has managed to make numerous cost cutting
moves such as cutting operating hours, buyouts to workers and a plan to
consolidate operations at 140 processing sites. Ending Saturday mail is another
plan the agency has but it needs to pass the US Congress before it can be
enacted. The Senate passed a bill in April to end Saturday mail however; the
House of Representatives did not approve the bill but failed to produce their
version before the month long recess.
Personally, I feel that ending Saturday
mail is the wrong approach – this could actually be a competitive advantage for
the postal service against UPS and FedEx. True, UPS and FedEx will deliver on
Saturdays but for an extra charge. However, the postal service is facing such a
dire situation it appears they have no choice but to reduce delivery services
to five days – perhaps Wednesdays instead of Saturdays?
There were some bright spots in its quarterly earnings -
although mail volume fell 3.6% to 38.5bn pieces, shipping services, package
delivery grew 9% in revenue compared to the same quarter a year earlier. While
email and online bill payments have hurt letter mail volumes, the USPS's
shipping business has benefited from online shopping and sites like eBay.com.
While there are few bright spots such as package delivery,
this will not be enough to maintain this archaic behemoth that is trying to
modernize operations. Competing against the likes of UPS and FedEx is difficult
at best in normal times and although it has partnered with both companies to provide last mile
delivery for such products as UPS’ SurePost and FedEx’s SmartPost this too is
not enough to sustain the postal service. Perhaps privatizing it is the answer?
One thing is for sure, something needs to be done and soon. A decisive answer
is needed from the US Congress instead of what appears to be ignoring the
situation. There are opportunities for the postal service but sadly it appears
that its hands are tied as it waits its outcome from a Congress that appears to
be not really that concern.
